Mortgage – HousingWire

As rate hikes loom, UWM rolls out jumbo ARMs
Freddie Mac spurs landlords to report on-time rent payments
Valon Raises $43.9M for servicing platform, valued at $590M
Purchase mortgages overtake refis in Q3
Loan officer wallets flatten as refis dry up
Citigroup taps into the red-hot reperforming loan market

As rate hikes loom, UWM rolls out jumbo ARMs

Posted: 03 Nov 2021 02:04 PM PDT

United Wholesale Mortgage rolled out prime jumbo adjustable-rate mortgage (ARMs) products on Wednesday, signaling that demand for ARMs is growing inside of the broker community.

According to the top-ranked wholesale lender, their prime jumbo ARMs will allow brokers to offer “competitive pricing” on five-, seven- and 10-year adjustable-rate mortgages.

"Independent mortgage brokers now have a competitive option for those borrowers who are likely to move or refinance within a few years," the Pontiac, Michigan-based lender said in a statement.

UWM added that this product will be beneficial to those who "may be looking for a lower rate on primary, second or investment homes they don't plan on keeping long-term."

Although the wholesale lender did not publicly disclose the rate or the terms, Mark Westcott, senior loan officer at CrossCountry Mortgage, told HousingWire that there must be an incentive for borrowers to opt for an ARMs product instead of opting for a 30-year fixed-rate conventional loan.

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The post As rate hikes loom, UWM rolls out jumbo ARMs appeared first on HousingWire.

Freddie Mac spurs landlords to report on-time rent payments

Posted: 03 Nov 2021 11:44 AM PDT

Freddie Mac wants to encourage multifamily landlords to report positive rental payments to the credit bureaus to give renters a better shot at qualifying for a mortgage.

The government-sponsored enterprise will provide closing cost credits on multifamily loans for rental landlords who agree to report on-time rental payments through Esusu Financial. Esusu, a credit-building fintech, will deliver the on-time rental payment reports from landlords' property management software to the credit bureaus. Freddie Mac negotiated discounted fees for Esusu's services.

Much like Fannie Mae's recent move to include rental payments in its underwriting process, only on-time rent payments will be included. Taking into consideration on-time rental payments is one way the government-sponsored enterprises are hoping to gain a clearer picture of borrowers' credit profile. Currently, only 10% of renters benefit from on-time rental payments as part of their credit scores, which limits their ability to access credit, Freddie Mac said in a release.

"Rent payments are often the single largest monthly line item in a family's budget but paying your rent on time does not show up in a credit report like a mortgage payment," said Michael DeVito, CEO of Freddie Mac. "That puts the 44 million households who rent at a significant disadvantage when they seek financing for a home, a car or even an education. While there remains more to do, this is a meaningful step in addressing this age-old problem."

The biggest obstacle to reporting on-time rental payments, according to Freddie Mac, is the administrative and compliance burden for landlords. Esusu manages the reporting process end-to-end and ensures compliance.

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Esusu can report up to two years of past on-time rental payments, enough to move the needle on consumer credit scores. Currently, when rents are reported to the credit bureaus, it's mostly to ding consumers' credit reports for missed payments when they go to a collections agency, said Alexis Sofyanos, senior director of equity in multifamily housing at Freddie Mac.

"Freddie Mac wants to flip that script, so that renters who pay their rent on time and in full each month get credit for doing so, while also putting in safeguards for the most vulnerable," Sofyanos said.

Esusu's platform also allows renters to verify their rental history. Esusu co-founders Samir Goel and Abbey Wemimo said that the partnership with Freddie Mac allows them to tackle credit invisibility, which disproportionately afflicts people of color. In a prepared statement, Goel and Wemimo said that there are 45 million adults in America with no credit score, "the vast majority of whom are immigrants, minorities and low-to-moderate income households."

"The benefit of the Esusu platform is that everyone wins," said Goel and Wemimo. "It’s a win for renters, property owners and society at large."

While Fannie Mae and Freddie Mac have now both taken steps to allow renters to more easily access credit, their regulator, the Federal Housing Finance Agency, is considering whether to allow the GSEs to use an alternative credit score model. The alternative under consideration, developed by VantageScore Solutions, includes data like rental and utility payments, which allows it to score 96% of the adult population. VantageScore is owned by the three major credit bureaus.

FHFA Acting Director Sandra Thompson has also recently said she would like the GSEs to take into consideration other non-traditional data sources, such as cell phone payments.

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Valon Raises $43.9M for servicing platform, valued at $590M

Posted: 03 Nov 2021 11:29 AM PDT

Digital mortgage-servicing platformer Valon announced Wednesday a $43.9 million raise in equity funding with participation from affiliates of Starwood Capital Group and Freedom Mortgage, alongside independent investor and Softbank Group International CEO, Marcelo Claure.

Fresh off the heels of its $50 million Series A raised in February, Valon’s total funding now sits at $93.9 million and puts the proptech at a roughly $590 million valuation, people with knowledge of the matter told Bloomberg.

Previous investors Andreessen Horowitz, New Residential Investment Corporation (NRZ), an affiliate of Fortress Investment Group and 166 2nd also participated in the Wednesday round.

Founded in 2019 and marketed as a mobile-friendly servicer, Valon allows borrowers to make payments, view balances, request information and manage escrows through its cloud-based platform. It also allows lenders to request API data feeds and view borrow performance.

The software is built on Kubernetes, an open-source automation platform designed by Google and a familiar program to Valon co-founders Andrew Wang and Eric Chiang, who had both previously worked for the internet search giant. Third co-founder Jon Hsu is also familiar with cloud-based development having worked for Twilio, a cloud-based communication platform.

After the CARES Act federal moratorium on foreclosures – put into place to protect borrowers during the pandemic – expired on July 31, 2021, Valon believes now more than ever servicers have a duty to move borrowers in to the next appropriate stage as safely and swiftly as possible.

"Many homeowners are unaware of just how resourceful their mortgage servicers should be. Instead of struggling to make payments and relying on temporary fixes, they could instead rely on sustainable long term solutions from a company like ours," said Wang.

Amidst any mortgage crisis, the burden of navigating such a complicated world is on the borrower. According to Wang, the mortgage sector is frustrating and lacks clear guidance on how to access plans for repayment, reinstatement, deferral or loan modification. As a result, a number of homeowners are at risk of losing their homes.

“But it doesn't have to be that way,” Wang added. “Valon's software platform is designed to be intuitive and deliver a truly borrower-centric experience. Putting the homeowner first is the foundation of our technology.”

Amidst the mortgage ecosystem’s continued changes, Valon’s business model seems to be working. In the last nine months the proptech received approval to service mortgages backed by Freddie Mac (it was already approved for Fannie Mae previously) and the Federal Housing Administration. It also gained 20,000+ consumers and expects $6 billion in mortgages being serviced on the Valon platform by year end.

“Valon has changed the game in Real Estate with a consumer first approach to keep the borrower better informed of their options as they navigate their homeownership journey. By aligning themselves with homeowners, they will build trust necessary for homeowners to partner with them in both good and bad times," said Claure.

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Purchase mortgages overtake refis in Q3

Posted: 03 Nov 2021 11:23 AM PDT

The “refi boom” is indeed coming to an end. For the first time since the beginning of the pandemic, purchase mortgages outpaced refinancings in the third quarter of 2021, according to the latest TransUnion report published on Wednesday.

The total mortgage balances grew 8% year-over-year to $10.5 trillion in the third quarter. New home purchases accounted for 53% of the total – higher than 43% of the same period of 2020, but still lower than 72% of 2019.

Meanwhile, refis dropped to 47% of the total mortgage originations driven by slowed demand, especially for “rate and term refinancing,” which decreased 23% year-over-year, the authors of the report found.

Joel Mellman, senior vice-president and mortgage business leader at TransUnion, said the expectation is that home purchases continue to outpace refis, as demand for homes stays strong and inventory gradually improves.

“This is assuming mortgage rates continue to rise, which will cause refinances to decline,” he said in a statement.

Following several quarters of hyper-growth, activity in mortgage origination has started to slow down due to a combination of low inventory and rising home prices, the report showed.

Originations went from 1.9 million in the third quarter of 2019 to 3.3 million in the same period of 2020 and 3.5 million in 2021.

The report shows that Fannie Mae‘s originations declined 7.1% in the third quarter of 2021, compared to 2020, while Freddie Mac increased only 1.1% year-over-year.

Jumbo loans had the best performance, up 36.9% in the same period. FHA loans increased at a slower pace: 15.8%.

According to Mellman, origination growth was most pronounced for Gen Z consumers. “We expect this to continue as that generation ages, and they look to enter the housing market and become home buyers for the first time.”

Another report published this week from SimpleNexus showed that loan officer commissions declined 17% year-over-year in the third quarter, largely because of waning refi volume.

“The heyday of ultra-low rates and enormous refinance volume is over, and compensation is starting to settle back to pre-pandemic levels,” said Lori Brewer, EVP and general manager at SimpleNexus.

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Loan officer wallets flatten as refis dry up

Posted: 03 Nov 2021 03:00 AM PDT

To the surprise of virtually no one, loan officer commissions started to head south in the third quarter, dropping 17% year-over-year, according to SimpleNexus' third quarter mortgage loan compensation report.

The reason? Yep, you guessed it: waning refi volume.

From July to September, monthly refi commission dipped by 37%, whereas monthly purchase loan commission rose by a slight 2%, the report found.

Concurrently, per-loan commission rates have started falling, decreasing to 100.372 basis points in Q3 2021 from 102.878 bps in Q3 2020, a 2.44% decline, SimpleNexus said.

The report added that lenders on average have started to "dial down" per-loan commission rates on refis by 7.17%, to 88.384 bps in the third quarter of 2021 from 95.210 basis points in Q3 2020.

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On the purchase loan side of things, per-loan commissions also took a dive by 1.58% year-over-year, to 108.102 bps in Q3 2021 from 109.838 bps in Q3 2020.

The report also stated that LO funded volume per month stumbled to $2.2 million, a decrease of 14.9% from the third quarter 2020. Refi volume funded by individual LOs declined to $0.9 million in Q3 2021 from $1.3 million in Q3 2020, a 32% drop. At the same time, purchase volume increased 4% to $1.5 million in Q3 2021 from $1.4 million in Q3 2020.

"The heyday of ultra-low rates and enormous refinance volume is over, and compensation is starting to settle back to pre-pandemic levels," said Lori Brewer, EVP and general manager at SimpleNexus, which recently acquired her former company, LBAWare.

On a happy note, Brewer remarked that "2021 is still shaping up to be the second-highest production year in the last decade, with modest growth in the purchase market helping take the edge off declining refinance volumes."

Meanwhile, loan officer staffing levels have remained steady year-over-year, falling by a mere 2%. Production-wise, LOs averaged 7.0 loans per month in Q3 2021, versus an average of 9.0 loans a month during the same period last year.

On the other hand, loan processor staffing grew 23% year-over-year, SimpleNexus said. Loan processors averaged 29% fewer loans per month in the third quarter, "fueling a 33% decrease in quarterly bonus compensation earned from $3,201 per processor per month in Q3 2020 to $2,140 in Q3 2021."

The dissonance between an overcrowded workforce and falling loan volume could spell layoffs in the future.

"We will be watching to see if lenders reduce headcount or take a more conservative approach to incentive comp to protect margin," Brewer said.

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Citigroup taps into the red-hot reperforming loan market

Posted: 03 Nov 2021 03:00 AM PDT

Global lender Citigroup is capitalizing on a vibrant U.S. market for mortgages that have been dinged up by the pandemic.

The bank, through its residential mortgage-backed securities conduit, Citigroup Mortgage Loan Trust, has securitized some 45,000 reperforming loans valued in aggregate at $6.8 billion through five private-label offerings year to date as of the end of October, Fitch Ratings reports show. And they are truly scratch-and-dent loans.

The Fitch reports show that between 76% and 98% of the mortgages in the loan pools being securitized have been modified. In addition, between 1% to 12% of the loans across the five deals were 30 days delinquent as of the cutoff date in late October. And another 25% to 55% of the loans in the pools across the five deals — though current as of the end of October — have experienced one or more delinquencies within the last 24 months.

Yet, there is a huge demand for these reperforming loans and the securities issued against them.